Performance-related pay for the public sector rejected by Personnel Today’s Austerity Panel

Personnel Today‘s Austerity Panel has rejected calls for more performance-related pay in the public sector, warning it could lead to increased wage bills and will not improve productivity.

Earlier in the week, the Chartered Institute of Personnel and Development (CIPD) called on government to make greater use of performance-related pay and bonuses in the public sector to increase productivity and drive reform.

The government will reveal its Emergency Budget next week (22 June), which is expected to include measures aimed at reducing the public sector wage bill.

But Graham White, HR director of Westminster Council, insisted “performance-related pay doesn’t work”.

He said: “Even in the private sector, performance pay rarely delivers the expected outcomes. It sounds intuitive in principle and can look very exciting on paper but when put into practise it rarely delivers anything but increased costs with no increase in performance. The key drivers for increased productivity and output are fairness, achievement and recognition, and not money.

“Performance pay has not stood the test of time within the private sector and will fare no better in the public sector.”

White warned performance-related pay would “distort” performance within the public sector, with staff working to meet set targets rather than improving customer service.

“Performance-related pay in the public sector will further distort performance by compelling individuals to disproportionately deliver only certain aspects of their role,” he said.

Roger Seifert, professor of industrial relations and HR management at Wolverhampton Business School, said: “The CIPD is wrong to suggest that such schemes can contribute to a more efficient public sector.”

He added: “The schemes are very hard to design and implement – how do you measure the performance of the individual teacher, nurse or soldier?

“They tend to be opposed by staff themselves and are not enthusiastically embraced by managers. Most important, there is no evidence they improve performance, but there is evidence they are seen as unfair and cut across professional duties.”

Seifert suggested the best way to improve performance was to enable “long-term stable pay systems with clear promotion avenues, correct staffing levels and more accountable senior managers”.

Richard Crouch, head of HR and organisational development at Somerset County Council, warned performance-related pay could encourage “the pay bill to creep up” in the long-term and there would be “a substantial cost in administering and applying performance-related pay in the public sector to reduce its subjectivity” because government work would not be easy to measure.

Angela O’Connor, chief people officer at the National Police Improvement Agency, agreed, saying: “We don’t have the same incentive in the public sector, unless we can make public value more meaningful and quantifiable.”

She added: “How could we be confident that professional, in the public interest, decisions on cuts were being made if the person wielding the axe is incentivised to make the cuts?

“The CIPD has missed the point about why people work in the public sector – making a difference comes much higher up the list than earning a packet.”

Meanwhile, Dean Shoesmith, president of the Public Sector People Managers’ Association, said while creating a link between contribution and pay could be “useful”, it had to be developed at a local level. “Otherwise there’s a danger the scheme is too much of a one-size-fits-all solution and could be exposed to manipulation,” he said.

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